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January 29, 2008

What is the Real Cost of Financing?

For any of you who have purchased a home and sat at a closing table, you know how confusing and difficult it is to understand your mortgage documents. Even before that the process of applying for and comparing different mortgages can be very complicated. One of the key numbers consumers and mortgage brokers use to determine the best value in a mortgage is through the APR, the Annual Percentage Rate.

The APR is a tool used to compare different loan programs but what many consumers do not realize is that the APR is not regulated and is not always calculated the same way between lenders. So as the old expression goes how does one compare apples to oranges?

We start by asking what numbers are used to calculate the APR and then comparing these numbers but taking into count which fees are included and which are not. Below is a list of some of the fees APR's sometimes include, such as various closing costs and fees associated with the loan. The lender than takes these fees and spreads these figures out over the life of the loan. The objective is to limit the ability of the lender to hide fees and upfront costs behind low interest rates in their advertising.

If you have more questions or would like to find out if you qualify for a loan, please feel free to visit www.watersrealtymn.com or email me at cherikuhn@watersrealtymn.com. And as always please feel free to call me with any questions at 612-865-9150.

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What is the Real Cost of Financing?

For any of you who have purchased a home and sat at a closing table, you know how confusing and difficult it is to understand your mortgage documents. Even before that the process of applying for and comparing different mortgages can be very complicated. One of the key numbers consumers and mortgage brokers use to determine the best value in a mortgage is through the APR, the Annual Percentage Rate.

The APR is a tool used to compare different loan programs but what many consumers do not realize is that the APR is not regulated and is not always calculated the same way between lenders. So as the old expression goes how does one compare apples to oranges?

We start by asking what numbers are used to calculate the APR and then comparing these numbers but taking into count which fees are included and which are not. Below is a list of some of the fees APR's sometimes include, such as various closing costs and fees associated with the loan. The lender than takes these fees and spreads these figures out over the life of the loan. The objective is to limit the ability of the lender to hide fees and upfront costs behind low interest rates in their advertising.

If you have more questions or would like to find out if you qualify for a loan, please feel free to visit www.watersrealtymn.com or email me at cherikuhn@watersrealtymn.com. And as always please feel free to call me with any questions at 612-865-9150.